— A Brief Analysis of The Future of European Competitiveness Report
Executive Summary
◆ A Stern Warning in Times of Prosperity: The 400-page report The Future of European Competitiveness, commissioned by the EU and led by
Mario Draghi, is described as a "stern warning in times of prosperity," directly addressing existential challenges facing Europe.
◆ Insufficient Productivity: Over the past two decades, European economic growth has continuously slowed. The GDP per capita gap with the
US has widened to 46%, with productivity stagnation becoming the primary concern.
◆ Germany as a Microcosm: As Europe's largest economy, Germany's struggles in manufacturing, the transition to electric vehicles, energy dependency,
and an aging population reflect the structural issues plaguing the entire continent.
◆ Global Comparison: The US maintains dynamism through technology and immigration; China advances through digitalization and industrial upgrading.
Europe, however, is caught in a "high-income stagnation trap," lacking new growth engines.
◆ Potential Paths Forward: To break the impasse, Europe must simultaneously advance digital transformation, reshape its green energy strategy, reform
population and immigration policies, and undertake deep institutional reforms at the EU level.
◆ TuPu's Perspective: For Chinese companies, although Europe faces growth challenges, opportunities for cooperation and investment still exist in
sectors like new energy, green transformation, pharmaceuticals, and healthcare.
Introduction
The extensive 400-page report The Future of European Competitiveness, commissioned by European Commission President Ursula von der Leyen and
led by former ECB President Mario Draghi, has garnered widespread attention in Europe since its release. It is seen as a "stern warning in times of prosperity"
—not only does it meticulously outline Europe's deep-seated dilemmas in productivity, demographics, institutions, and global competition, but it also frankly
confronts the challenges crucial to Europe's future survival.
I. The Report's Background and Warnings
From the Draghi-led report to urgent calls from European think tanks, a core issue is repeatedly amplified: insufficient productivity is causing Europe to lose
competitiveness.
Substantial data in the report indicates:
• The economic gap between Europe and the US has been widening since 2002, with EU GDP per capita now only 54% of that of the US.
• Labor productivity has long lagged; the growth in disposable income per capita in the US since 2000 is almost double that of Europe.
• The population aging trend is pronounced; by 2100, Europe's working-age population is projected to shrink by nearly one-third.
Behind these figures lies a long-term, structural crisis: Europe's social model and welfare system are decoupled from its productivity growth. Intensifying
global geopolitical competition finds Europe lacking new engines for growth.
II. Germany: Europe's "Microcosm"
As Europe's largest economy, Germany stands at a typical crossroads.
The Dilemma of a Manufacturing Powerhouse
Germany's traditional strengths lie in automobiles, chemicals, and mechanical engineering. However, pressures from electrification, digitalization, and
the green transition are straining this model. Volkswagen and Mercedes are being outpaced by Tesla and BYD in the electric vehicle race, while chemical
giants see their international competitiveness eroded by rising energy costs. Manufacturing's share of GDP is higher in Germany than in most European
countries—both an advantage and a burden.
Demographics and Labor Market Strains
Germany's total population is set to continue shrinking over the next two decades. Immigration is key to supplementing the workforce, but balancing
immigration with social integration remains a persistent political challenge. Compared to the US, which continuously injects vitality through immigration, the
demographic momentum in Germany and Europe overall is clearly more negative.
Energy Dependency and Industrial Costs
The vulnerability of Germany's energy transition was fully exposed after the Russia-Ukraine war. High energy prices have weakened industrial competitiveness
and are driving capital gradually towards the US and Asia. The sluggishness of Europe's energy strategy is directly reflected in the relocation of German chemical
and metallurgical industries.
III. Global Comparison: Europe's Structural Disadvantages
Considering global data in the report, Europe's problem is not "no growth," but "growth insufficient to sustain its institutional model."
• Compared to the US: The US maintains high productivity through technology, capital markets, and immigration, enabling it to sustain a high-welfare society.
Europe lacks this kind of "growth dividend."
• Compared to China: Even after its population peak, China maintains certain growth rates through digitalization and industrial upgrading. Europe lags significantly
in digital economy, AI, new energy vehicles, and other fields.
• Compared to Emerging Markets: Many Latin American and Southeast Asian countries face the "middle-income trap," while Europe is in a "high-income
stagnation trap"—maintaining high welfare but lacking innovative growth drivers.
The report's use of the term "existential challenge" is no exaggeration. If productivity cannot be enhanced, Europe will be forced to compromise on its values
—welfare, environmental protection, social inclusion—which fundamentally underpins its legitimacy.
IV. Germany's Lesson: Potential Paths Forward
Germany's problems are Europe's problems. Using Germany as a mirror, several potential future paths emerge:
Digital Transformation as a Breakthrough
Europe must increase investment in AI, semiconductors, and digital supply chains; otherwise, it will remain dependent on the US and China. This requires not
only funding but also a transnational, integrated R&D system.
Reshaping Energy and Green Industries
Germany still has opportunities in new energy vehicles, batteries, and hydrogen, but it must squarely address cost disadvantages and build new supply chain
advantages through cooperation with external partners, including China.
Demographic and Social Reforms
Proactive population policies and immigrant integration are the only ways to supplement the labor force. Germany's experience shows that immigration is not
purely a burden but a potential source of productivity.
Deep Institutional Reforms at the EU Level
The report finally raises the possibility of "treaty change," implying that Europe needs to transcend inter-member state bargaining and build a more centralized,
effective common policy platform. If Germany can provide leadership here, it might help avoid fragmented decline.
V. TuPu's Perspective on the Global Landscape
From the viewpoint of globalized enterprises and capital, Europe's future determines whether it remains a market worth deep engagement:
• For Chinese Companies: Although the European market is full of regulatory barriers, there is broad scope for cooperation in areas like new energy, green
transformation, and digitalization. Chinese companies need deeper localization and industrial alliance strategies.
• For Investors: Long-term growth expectations for Europe are not optimistic, but specific sectors (high-end manufacturing, green energy, pharmaceuticals,
healthcare) still hold value. The investment logic should shift towards "structural opportunities" rather than overall growth.
• For Europe Itself: It must find a new balance between "values" and "efficiency"; otherwise, it risks losing its independent voice on the global stage.
Conclusion
The Future of European Competitiveness report is not merely an academic analysis but a "declaration for survival." The challenges Europe faces are not
short-term cyclical issues but structural ones—only simultaneous efforts on demographics, productivity, energy, and institutions can avert long-term decline.
Germany's reality tells us that Europe must choose change, or risk being marginalized in global competition. For external observers and partners, this presents
both risks and opportunities.
